Correlation Between Strategic Education and New Oriental
Can any of the company-specific risk be diversified away by investing in both Strategic Education and New Oriental at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Strategic Education and New Oriental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Strategic Education and New Oriental Education, you can compare the effects of market volatilities on Strategic Education and New Oriental and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Strategic Education with a short position of New Oriental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategic Education and New Oriental.
Diversification Opportunities for Strategic Education and New Oriental
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Strategic and New is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Education and New Oriental Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Oriental Education and Strategic Education is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Strategic Education are associated (or correlated) with New Oriental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Oriental Education has no effect on the direction of Strategic Education i.e., Strategic Education and New Oriental go up and down completely randomly.
Pair Corralation between Strategic Education and New Oriental
Given the investment horizon of 90 days Strategic Education is expected to generate 2.32 times less return on investment than New Oriental. But when comparing it to its historical volatility, Strategic Education is 1.63 times less risky than New Oriental. It trades about 0.04 of its potential returns per unit of risk. New Oriental Education is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 3,282 in New Oriental Education on August 30, 2024 and sell it today you would earn a total of 2,670 from holding New Oriental Education or generate 81.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Strategic Education vs. New Oriental Education
Performance |
| Timeline |
| Strategic Education |
| New Oriental Education |
Strategic Education and New Oriental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Strategic Education and New Oriental
The main advantage of trading using opposite Strategic Education and New Oriental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strategic Education position performs unexpectedly, New Oriental can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in New Oriental will offset losses from the drop in New Oriental's long position.| Strategic Education vs. Element Solutions | Strategic Education vs. DoubleVerify Holdings | Strategic Education vs. CECO Environmental Corp | Strategic Education vs. American Public Education |
| New Oriental vs. Gaotu Techedu DRC | New Oriental vs. 17 Education Technology | New Oriental vs. Chegg Inc | New Oriental vs. Elite Education Group |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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